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Costco Wholesale Corp. Reports Operating Results (10-Q)

December 16, 2011 | About:

Costco Wholesale Corp. (NASDAQ:COST) filed Quarterly Report for the period ended 2011-11-20.

Costco Wholesale Corp. has a market cap of $36.78 billion; its shares were traded at around $82.57 with a P/E ratio of 25 and P/S ratio of 0.4. The dividend yield of Costco Wholesale Corp. stocks is 1.1%. Costco Wholesale Corp. had an annual average earning growth of 8.7% over the past 10 years. GuruFocus rated Costco Wholesale Corp. the business predictability rank of 5-star.

Highlight of Business Operations:

Net sales increased $2,358 or 12.5% during the first quarter of 2012 compared to the first quarter of 2011. This increase was primarily attributable to an increase in comparable warehouse sales, and the remainder primarily from sales at the 24 net new warehouses opened since the end of the fourth quarter of fiscal 2010 (28 opened, four closed, two due to relocation and two temporarily closed for repairs due to damage caused by the March 11, 2011 Japan earthquake, one of which has been re-opened and the other expected to re-open in the third quarter of fiscal 2012).

Gross margin as a percent of net sales decreased 35 basis points compared to the first quarter of 2011. Gross margin for core merchandise categories (food and sundries, hardlines, softlines, and fresh foods), when expressed as a percent of core merchandise sales, rather than total net sales, decreased 5 basis points, primarily due to decreases in fresh foods and food and sundries, with a partial offsetting improvement in hardlines. When expressed as a percentage of total net sales, the core merchandise gross margin decreased 32 basis points from the prior year, due primarily to the increased sales penetration of the lower-margin gasoline business. Warehouse ancillary and other businesses gross margins decreased by two basis points as a percent of total net sales. Increased penetration of the Executive Membership two-percent reward program and increased spending by Executive Members negatively affected gross margin by one basis point.

SG&A expenses as a percent of net sales decreased 18 basis points compared to the first quarter of 2011. Excluding the effect of gasoline price inflation on net sales, SG&A expenses increased four basis points. This increase was primarily due to contributions to the Yes on 1183 Coalition in support of an initiative reforming alcohol beverage laws in Washington State and higher stock-based compensation expense, which had negative impacts of eight and seven basis points, respectively. These were partially offset by an 11 basis point decrease in our warehouse and central operating costs, largely payroll.

Our primary sources of liquidity are cash flows generated from warehouse operations and cash and cash equivalents and short-term investments balances. Of these balances, approximately $1,154 and $982 at November 20, 2011, and August 28, 2011, respectively, represented debit and credit card receivables, primarily related to sales in the week prior to the end of our fiscal quarter or fiscal year, respectively.

Read the The complete Report

About the author:

Charlie Tian, Ph.D. - Founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

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